Conversion to ROTH IRA after age 59-1/2 (Will 5-year rule apply to me and/or my Beneficiaries?)
I’ve had a funded ROTH IRA for 20+ years. I’m age 61 and am planning on converting part of my Traditional IRA into my ROTH IRA (a little bit each year going forward).
My question is: Does the 5-year rule apply for each conversion for me personally? (and, more importantly, If I were to die suddenly, would my beneficiaries/heirs have to know that I recently did these conversions over the past few years in order to avoid having to pay any penalties and/or taxes if they were to inherit my ROTH IRA balance ant take it as a Lump Sum asap after my death?)
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-21 14:15
There are two 5 year holding periods for Roth IRAs – the conversion holding periods no longer apply to you because you are over 59.5. Your Roth is also qualified and tax free. Therefore, the entire balance including all future gains can be distributed without tax or penalty either to you or your beneficiaries at anytime. Hopefully, your beneficiaries would not cash out the inherited Roth since it will continue to earn tax free. Under the 10 year rule, if they could hold to the last year or close to the last year they would be able to generate additional tax free gains, so that opportunity should be considered.